S&C Obtains Dismissal of Securities Lawsuit Against AT&T

October 1, 2021

On September 28, U.S. District Judge Valerie Caproni of the Southern District of New York dismissed with prejudice a putative class action against AT&T and 14 of its current and former directors and officers seeking billions in alleged damages.

In its second amended complaint, the plaintiff claimed that AT&T made false public statements about the success of its DirecTV Now streaming service. They alleged violations of the Exchange Act on behalf of AT&T shareholders, and raised Securities Act claims for Time Warner shareholders who received AT&T stock in the companies' 2018 merger.

Judge Caproni stressed that statements expressing corporate optimism about the future strength of a company's product are not actionable as false statements of fact. “Plaintiff had alleged no facts from which the Court could infer that Defendants did not believe their own statements that the product would be profitable,” she wrote.

AT&T also defeated plaintiff's attempt to generate securities fraud from an alleged scheme by AT&T employees to create fake accounts and inflate sales numbers for DirecTV Now. The judge found that plaintiff had failed to identify any facts indicating that the alleged fraudulent practices were both widespread and also known to senior AT&T executives. Instead, Judge Caproni found that AT&T's response to these fraud allegations, which included an internal investigation and employee firings, indicated that the company had “no tolerance for rogue employees who engage in unethical behavior” and that AT&T “values its integrity and reputation above employee retention.” 

In addition, plaintiff failed to present any facts that would allow the court to infer that the allegedly inflated DirecTV Now subscriber numbers would have been material to an AT&T investor, given the small segment of AT&T's overall business that the service represented.

The S&C team representing AT&T included Robert Sacks, Bill Monahan, Lenny Traps, Elizabeth Young and Colin Hill.